Which of the following correctly describes the automatic mechanism through which the economy adjusts to long-run equilibrium?
A) the leftward shift of the short-run aggregate supply curve that occurs after a recession
B) the rightward shift of the short-run aggregate supply curve that occurs after a recession
C) the leftward shift of the aggregate demand curve that occurs after a recession
D) the rightward shift of the aggregate demand curve that occurs during a recession
Answer: B
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Let MUa and MUb stand for the marginal utilities of apples and bagels. Let Pa and Pb stand for their prices. The general necessary condition for consumer equilibrium is
A) MUa = MUb. B) MUa = MUb and Pa = Pb. C) MUa/Pa = MUb/Pb. D) MUa/MUb = Pb/Pa.
Due to inflation, nominal prices are usually
A) equal to real prices. B) smaller than real prices. C) larger than real prices. D) a constant proportion different from real prices.
According to the real business cycle theory, an increase in an input price, such as oil, will
A) increase both real Gross Domestic Product (GDP) and the price level. B) increase real Gross Domestic Product (GDP) but not change the price level. C) decrease real Gross Domestic Product (GDP) but increase the price level. D) decrease both real Gross Domestic Product (GDP) and the price level.
For a perfectly competitive firm that should continue to operate in the short run, loss is minimized where
a. MR is maximized b. MR = MC c. P < MC d. MR < MC e. MR > ATC